By Ovunc Kutlu
ISTANBUL (AA) - Fitch Ratings downgraded the Maldives' long-term foreign currency issuer default rating to ‘CC’ from ‘CCC’ on Thursday, citing mounting financial pressures that have heightened the risk of default.
Fitch's decision reflects concerns over the Maldives' deteriorating external financing and liquidity metrics.
"This is underscored by a recent material decline in the foreign-reserve buffers alongside elevated external debt service and limited external financing inflows," it said in a statement.
The Maldives' foreign exchange reserves declined by approximately 20% to $395 million in July, from $492 million in May, marking the lowest level since December 2016, it noted.
The Maldivian government faces $50 million in sovereign external debt-servicing obligations due in the fourth quarter of this year, in addition to $64 million in publicly guaranteed external debt. Fitch expects the Maldives' current account deficits to remain high in the short to medium term due to extensive public investment and heavy dependence on imports of food, energy, and capital goods.
The agency warned that further downgrades could follow if the Maldives fails to meet its debt obligations within grace periods.
Fitch typically does not provide outlooks for countries rated ‘CCC+’ or below.